Norway: June 1996
Prompted both by its membership in the European Economic Area (EEA) and by its implementation of the Uruguay Round results, Norway has taken steps to liberalize its economy, resulting in a stronger trade regime and better market opportunities for Norway's trade partners.
Norway implements trade reforms and strengthens its commitment to the multilateral trading system
Prompted both by its membership in the European Economic Area (EEA) and by its implementation of the Uruguay Round results, Norway has taken steps to liberalize its economy, resulting in a stronger trade regime and better market opportunities for Norway's trade partners.
According to a new WTO Secretariat report on Norway's trade policies and practices, the Norwegian economy now shows signs of continued growth, falling inflation and lower unemployment. After recovering from a recession in the early 1990s, Norway's economy grew on average by 3.5 per cent. Inflation, at 1.4 per cent in 1994, is expected to fall further this year.
The WTO Secretariat report and one prepared by the government of Norway will be the subject of two days of discussion at the Trade Policy Review Body of the WTO on 11 and 12 June. In its examination of Norway's economy, the WTO report notes that Norway's oil sector increased its direct contribution to GDP to 13.3 per cent in 1995 while services, including government services, accounted for over 60 per cent of GDP. Manufacturing totalled some 11 per cent while the share of agriculture, forestry and fisheries fell in 1995 to only 2.3 per cent of GDP. The report states that as much as 70 per cent of Norway's exports go to the European Union whereas more than 75 per cent of Norway's imports come from EU member states. A majority of Norway's trade is conducted on a duty-free basis under regional integration agreements.
Tariffs on industrial products currently average 5.6 per cent but more than 45 per cent of industrial tariff lines will be fully zero-rated following the implementation of Norway's Uruguay Round commitments. Duties on motor vehicles have already been cut to zero and Norway is considering eliminating other low or "nuisance" rates. Following Uruguay Round tariffication of non-tariff measures, Norway's duties on agricultural products have an estimated ad valorem rate of 98.4 per cent. Norway applied its post-Uruguay Round reductions on agricultural products from July 1995. However, the government also plans to introduce more competition in selected agricultural sectors and to bring domestic prices more in line with prices in neighbouring countries, which are often higher than prevailing international prices. According to the report, forestry and wood products is one of the few sectors with distinct tariff escalation. The forestry sector is also supported by subsidies, grants, tax credits and concessions, some with a regional assistance dimension.
No major changes in Norway's intellectual property legislation were required as a result of the WTO's intellectual property rights agreement. Norway is a member of the WTO Government Procurement Agreement and revisions to Norway's laws were expected to come into force in May 1996. During the last five years, Norway has not taken any anti-dumping, countervailing measures or safeguard actions.
Norway has also opened its foreign investment regime, partly because of new legislation designed to meet the requirements of Norway participation in the EEA. The new conditions apply only to EEA participants, notably in real estate, financial services and industrial acquisitions. According to the report, Norway has announced its intention to apply any future liberalization of capital movements required by the EEA treaty without discrimination. While there are a number of limitations in Norway's General Agreement on Trade in Services (GATS) Schedules on financial services, these have in practice been substantially liberalized by the EEA Agreement and Norway has decided to apply these provisions to all WTO members. While the traditional monopolistic structure of the telecommunications sector is being replaced by a more competitive environment, Telenor AS, the public telecommunications operator, is still the dominant entity in public services and terminal equipment and has certain exclusive rights. The report notes that the government will deregulate telecommunications networks and services according to the timetable set out by the EU, with infrastructure and voice telephony scheduled for deregulation by January 1998. Competition is already allowed in other basic telecommunications services, and the market for telecommunications equipment has been open since 1988.
Domestic air transport was liberalized for local firms in 1994, and the market is to be opened to carriers from other EEA States in 1997. In maritime services, Norwegian coastal trade is open and there are no bilateral freight-sharing arrangements. There is no reciprocity of market access in maritime transport in the EEA Agreement. Subsidies are extended to film production to support Norwegian culture and the Norwegian Broadcasting Corporation receives licence fees to finance its operations. Under Norway's GATS commitments, there are no limitations on market access or on national treatment in travel agencies, tour operators, tourist guides or hotels and restaurants. However, there are limitations on the presence of natural persons.
Norway's participation in the EEA, notes the report, does not mean that it has joined the EU's single market. Full and free circulation of goods does not apply, although internal rules of origin have been substantially relaxed to allow full cumulation of EEA origin. The report says the Agreement goes a long way in providing Norwegian businesses access to the EU single market on terms similar to firms located within the EU. With few exceptions, Norwegian technical regulations and standards are integrated with those of the EU internal market.
Norway, as a member of the European Free Trade Association has signed free-trade agreements with several central and eastern European countries, Israel and Turkey, and the Faroe Islands. From June 1996, Norway's bilateral agreements with the three Baltic States (Estonia, Latvia and Lithuania) will be replaced by EFTA agreements. Co-operation agreements have also been concluded between EFTA and Egypt, Morocco and Tunisia.
The report concludes that Norway's liberalization vis à vis other European countries has led to greater complexity in Norway's trade policies, resulting in a larger number of preferential agreements and greater potential differentiation among trading partners. However, this is countered by Norway's commitments under the Uruguay Round, advance implementation of agricultural concessions and the government's wish to eliminate low duties autonomously. These measures show Norway's strong commitment to an open multilateral trading system.
Notes to Editors:
The WTO Secretariat's report, together with a report prepared by Norway, will be discussed by the WTO Trade Policy Review Body (TPRB) on 11 and 12 June 1996. The WTO's TPRB conducts a collective evaluation of the full range of trade policies and practices of each WTO member at regular periodic intervals and monitors significant trends and developments which may have an impact on the global trading system.
Two reports, together with a report of the TPRB's discussion and of the Chairman's summing up, will be published in due course as the complete Trade Policy Review of Norway and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
The reports cover development of all aspects of Norway's trade policies, including domestic laws and regulations, the institutional framework, trade policies by measure and by sector. Since the WTO came into force, the "new areas" of services trade and trade-related aspects of intellectual property rights are also covered. Attached are the summary observations from the Secretariat and government reports. Full reports will be available for journalists from the WTO Secretariat on request.
Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995), Canada (1990, 1992 & 1994), Chile (1991), Colombia (1990), Costa Rica (1995), Côte d'Ivoire (1995), Czech Republic (1996), Dominican Republic (1996), Egypt (1992), the European Communities (1991, 1993 & 1995), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 and 1995), Kenya (1993), Korea, Rep. of (1992), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993), Morocco (1989 & 1996), New Zealand (1990), Nigeria (1991), Norway (1991), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992 & 1994), Uganda (1995), Uruguay (1992), Venezuela (1996) and Zimbabwe (1994).
The Secretariats report: summary
TRADE POLICY REVIEW BODY: NORWAY
Report by the Secretariat Summary Observations
Since the first Trade Policy Review of Norway in the economy has shown strong recovery from the recession of the early 1990s, with solid growth and falling inflation and unemployment. The current budget surplus will enable the Petroleum Fund to begin building reserves, with a view to sterilizing excess funds and providing a stable basis for future fiscal management.
Norway's already liberal trade policy has been extended as a result of unilateral reforms building on the implementation of the Uruguay Round results and the European Economic Area (EEA) Agreement. Even in agriculture, a major area of concern at the previous review, initial moves have been made to bring prices more into line with those in neighbouring markets, although they remain substantially higher than world prices for many products. The manufacturing sector is essentially unprotected from import competition at least within Europe - because of the dominance of duty-free preferential trade; additional planned liberalization on an m.f.n. basis will reduce potential trade diversion. The services sector has also been, and will be further, liberalized through Uruguay Round commitments and, in some key areas, the extension on an m.f.n. basis of actions taken under the EEA Agreement.
Since the previous review under GATT provisions, the Norwegian economy has experienced real growth averaging 3.5 per cent. Inflation has been brought under control, falling to 1.4 per cent in 1994; although prices increased by 2.5 per cent in 1995, this is partly attributable to an increase in VAT. Preliminary data for early 1996 indicate that inflation has fallen still further. Unemployment fell to 4.9 per cent in 1995, although a further 1.9 per cent of the workforce participated in job-creation programmes.
There have been no major changes in the overall structure of the Norwegian economy since the previous review. The oil sector has increased its direct contribution to GDP slightly to 13.3 per cent in 1995, as a result of increased production. Services, including government services, account for over 60 per cent of GDP and manufacturing for some 11 per cent. The share of agriculture, forestry and fisheries fell in 1995 to 2.3 per cent.
Since 1994, fiscal policy has been tightened, producing an estimated surplus in the central Government budget in 1995. The budgeted surplus of 1.3 per cent of GDP in 1996 is to be used to activate the State Petroleum Fund, designed to increase the transparency in the use of oil and gas revenues and provide a financial buffer against future fiscal shortfalls. Excluding oil and gas, however, a fiscal deficit is expected to remain; the authorities recognize the need to strengthen public finances against longer-term declines in oil and gas revenues. Monetary policy has been directed at maintaining the stability of the Norwegian krone against European currencies.
The current account surplus has grown in the last three years, with increases in merchandise exports in both oil and gas and "traditional" exports such as forestry and fisheries products. The direction of trade has remained stable since the last review, with a statistical increase in the share of the European Union (EU) as a result of the accession of Austria, Finland and Sweden. The EU now takes nearly 70 per cent of Norway's exports and supplies over 75 per cent of imports.
The foreign investment régime has been opened since the previous review, partly by new legislation designed to meet the requirements of Norway's participation in the EEA. Although in areas such as corporate structure and transport, the new conditions apply only to EEA participants, the new laws are applied erga omnes in real estate, financial services and industrial acquisitions, and Norway has announced its intention to apply any future liberalization of capital movements required by the EEA treaty without discrimination. Agriculture and fleet-based fishing are currently excluded from the liberalization, while the new legislation does not cover the acquisition of shares of companies engaged in shipping, oil drilling, aviation or financial institutions. The State oil company will participate in future oil and gas licensing rounds on a commercial basis against other companies.
Trade Policy Régime: Objectives and Framework
Following Parliamentary endorsement of the Uruguay Round Agreements on 30 November 1994, Norway became a founding member of the WTO. National legislation was considered to be in conformity with WTO rules on preshipment inspection, customs valuation and rules of origin, but modifications were required in safeguards, subsidies and countervailing measures. M.f.n. tariff commitments on industrial goods are to be implemented over five years, with the first reductions introduced from 1 January 1996; in agriculture, the tariffication commitments for the year 2000 were fully implemented on 1 July 1995. In the light of tariffication, Norway revised its GSP scheme for agricultural goods with effect from 1 July 1995 to provide duty-free treatment for specific items, 100 per cent duty reduction on the industrial element of various processed foodstuffs and cuts of 10-50 per cent on many other items.
The EEA Agreement, signed in 1992 between the EU and participating EFTA countries, including Norway, entered into force on 1 January 1994. The consequent application to Norway of the EU "acquis" required adaptation to some 2,000 legal acts of the EU. The Agreement covers trade in all industrial goods; while agriculture is not covered directly, an evolutionary clause aims at the progressive liberalization of agricultural trade. Fisheries trade between Norway and the EU is covered by a special protocol and an exchange of letters.
In participating in the EEA, Norway has not joined the single market. Full free circulation of goods does not apply, although internal rules of origin have been substantially relaxed to allow full cumulation of EEA origin. In principle, customs and immigration controls exist between Norway and the EU, but special provisions are being worked out to cover movement between Norway and Sweden. The Agreement goes a long way in providing Norwegian industrial and service enterprises access to the EU single market on terms similar to firms located within the EU.
Since the previous Trade Policy Review, Norway, as an EFTA member, has signed free-trade agreements (FTA) with several central and eastern European countries, Israel and Turkey, as well as the Faroe Islands. From June 1996, Norway's bilateral agreements with the three Baltic States (Estonia, Latvia and Lithuania) will be replaced by EFTA agreements. Co-operation agreements have also been concluded between EFTA and Egypt, Morocco and Tunisia. Importance is attached to the harmonization of rules of origin in such agreements.
Norway adopted a new, strengthened Competition Act with effect from 1 January 1994. Provisions of the EEA Agreement, identical to EU competition rules, are applied to restrictions on trade between Norway and other EEA participants, replacing anti-dumping and countervailing law in the areas covered by the agreement.
Trade Policies and Practices by Measure
By far the larger part of Norway's trade is conducted on a duty-free basis under regional integration agreements. M.f.n. tariffs on industrial products are generally modest, averaging 5.6 per cent; this will be reduced further over five years under Norway's Uruguay Round commitment to reduce its trade-weighted average tariff on industrial products by 44 per cent. The tariff on imported vehicles and parts, bound at 5.3 per cent, was reduced to an applied rate of zero in November 1995, and to reduce costs of duty collection, the Ministry of Finance is contemplating elimination of low rates on a number of other industrial items. More than 45 per cent of industrial tariff lines will be fully zero-rated following the implementation of Norway's Uruguay Round commitments.
In agriculture, tariffication, even with the application of full reduction, resulted in an average estimated ad valorem rate of 98.4 per cent. However, in line with government policy to introduce more competition in selected agricultural sectors and, over time, to bring domestic prices more in line with prices in neighbouring countries, applied tariffs for a number of agricultural items are significantly below bound rates. An authority, established in June 1993, to set minimum prices for imports of certain fish products has not so far been used.
Domestic indirect taxes (VAT and excise) are substantial, but do not appear to make any distinction between foreign and domestic goods. New excise taxes on carbon dioxide and sulphur dioxide emissions, introduced in the early 1990s in the expectation of parallel action by other countries, have had to be modified to maintain Norway's competitiveness. Excise duties and environmental taxes are also used to facilitate waste collection and recycling.
Import prohibitions are applied in support of U.N. sanctions, for health, safety and environmental reasons, and in conformity with the Convention on International Trade in Endangered Species (CITES). The coverage of import quotas on textiles and clothing has been reduced in the first "integration" phase of the Agreement on Textiles and Clothing. The only other goods subject to import licences are whale meat and related products from all sources and footwear from Chinese Taipei. The legal basis for import licensing, established under pre-GATT legislation, is expected to be modified in the near future when new legislation is introduced implementing the WTO Safeguards Agreement. Import surveillance by means of an end-use declaration is used for products which may be used as feedstuffs, while automatic licensing has been introduced for certain agricultural products in connection with the recent revision of Norway's GSP scheme.
State monopoly rights on foreign trade and first-hand bargaining and sales of meal, grain and animal feed have been abolished. Trade, distribution, processing and imports are open to competition, although direct purchasing from farmers is not much affected. The commercial and non-commercial activities of the Norwegian Grain Corporation have also been split into two separate legal entities; monopoly rights for import, export and wholesale trade in alcohol were replaced at the end of 1995 with a restrictive licensing procedure, while a newly-established wholesale trade and distribution company is to compete with private firms. However, the spirit production monopoly and the retail monopoly for alcoholic beverages continue as independent units. State-trading in pharmaceutical products has also been abolished under the EEA agreement.
With few exceptions, Norwegian technical regulations and standards are integrated with those of the EU internal market in the areas covered by the EEA Agreement. However, some Norwegian standards, including many sanitary and phytosanitary regulations, remain stricter than in other EEA countries and can also be applied against those countries. Norway also participates in the Nordic "White Swan" voluntary environmental labelling scheme, which is open to products from all sources and currently co-exists with EEA eco-labelling requirements.
No major changes in Norway's intellectual property legislation were required as a result of the WTO TRIPS Agreement. Norway is currently considering the introduction of legislation empowering customs officers to seize infringing imports or exports without a specific court order.
Under a new Act on Public Procurement, passed in 1992, government regulations issued to transform EU procurement directives into Norwegian law, took effect with the entry into force of the EEA Agreement. Norway is a member of the WTO Government Procurement Agreement; consequent revisions to the Procurement Act were expected to come into force in May 1996. There have been no anti-dumping, countervailing measures or safeguard actions by Norway since the previous review.
Some export controls are applied by Norway in conformity with United Nations' decisions and there are certain controls or licences on strategic goods and arms and munitions. Other export regulations cover cultural heritage items, hazardous waste, endangered species, ozone-depleting substances and grains, milled products and concentrated animal feeds.
Lending terms for government-supported export credits are determined by OECD guidelines and the Understanding on Export Credits for Ships. Mixed credits are available for projects with high priority in developing countries. The governmental Guarantee Institute for Export Credits (GIEK) mainly insures commercial and political risks, not considered profitable by private insurers, for small- and medium-size firms and operates on a no-gain-no-loss basis.
The EEA Agreement has similar rules on the provision of State aid to those of the EU, and in Norway's case is subject to monitoring by the EFTA Surveillance Authority. In 1993, the Norwegian Industrial and Regional Development Fund (SND) was formed by the merger of four State banks established to provide credit to specific sectors for reasons of social, industrial or regional policy. The fund focuses on small- and medium-sized firms, except in primary industries (where there are specialized State banks), oil and gas, shipping and financial services.
Norway provides extensive support to research and development. There have been no major policy changes in this area since the previous review, except provision in the EEA Agreement for European co-operation in this area.
Norway maintains significant regional aid schemes, designed to maintain the overall geographical distribution of the population. Under EEA regulations, these schemes are notified to and subject to approval by the EFTA Surveillance Authority. In 1994, the ESA accepted Norway's proposal to leave unchanged the area eligible for regional aid, although some modifications were made to the aid intensity and objectives, starting in April 1995. Regional aid, administered through the SND and municipalities, may be extended as loans or grants for investment or business development. In eligible areas, all enterprises may apply, except those engaged in primary production, oil extraction and refining. Regional development programmes also provide for restructuring in regions dependent on a single industry; however, several such programmes expired in 1995 and others are due to terminate in 1996. In 1994 and 1995, aid was granted to the food-processing industry to help it adjust to the more competitive international environment resulting from the WTO Agreement on Agriculture as well as the EEA Agreement.
Norway has notified to the WTO five subsidy schemes for environmental improvement. These mainly cover subsidies to invest in cleaner technologies, waste reduction and recycling. A loan and guarantee facility exists to finance treatment of hazardous waste. Grants are available for new energy-saving technologies.
Production subsidies for shipbuilding and repairs have been adapted to the EU Seventh Shipbuilding Directive; existing grants are to continue until the entry into force of the OECD shipbuilding agreement. Subsidies are available to Norwegian newspapers to promote a diversified press. Exemptions from taxes on certain energy products are available to the airlines, shipping companies and fisheries and to a lesser extent for the herring flour, pulp and paper industries. All manufacturing and mining enterprises are exempt from the consumption tax on electricity.
Price-fixing and -regulatory provisions cover a variety of goods and services; dominant firms may be required to notify prices to the Competition Authority.
Trade Policies and Practices by Sector
In general, relatively high protection for agriculture, which is to decline, contrasts with the modest protection for industrial products. The services sector has become more open, partly because some liberalization under the EEA Agreement is being carried out on an m.f.n. basis.
The Government has appointed a commission to examine current sectoral support measures, including State aids and the linkage to resource allocation. A report is expected by Summer 1996. Following this, the Government intends to conduct a full review of industrial and sectoral policies.
A number of changes in agricultural policies were introduced in 1993 to improve cost efficiency and market orientation. Guaranteed prices remain only for food grains and animal feed grains. For most other products, target prices are based on average prices over the previous year. Transfers to farmers have been reduced in the last three years. These changes are underpinned by the Uruguay Round results, although tariffs on temperate products are set very high following the tariffication of non-tariff measures, with the estimated average, even taking account of full reductions, above 200 per cent for live animals, meat and meat products, dairy products, cereals and milled products. By contrast, rates are zero or close to zero on tropical products. Most fruit and vegetables are subject to seasonal tariffs, which are normally reduced during the off-season. Tariff quotas, applied to products subject to minimum access commitments, are generally allocated on the basis of past performance, with provision for new importers.
An import council is being established to monitor developments in agricultural markets and advise the Government on tariff reductions which may provide a "reasonable" level of competition. The State Grain Corporation is empowered to adjust tariffs on agricultural products to "prevent disturbances in the domestic market and secure adequate and required supplies to consumers and the food processing industry". Since July 1995, a new price compensation scheme has replaced the system of export refunds for the inward-processing of agricultural products. Customs duties are now suspended or reduced, provided the finished goods are exported within certain time limits.
Forestry and wood products is one of the few sectors with distinct m.f.n. tariff escalation, with imports of timber duty free, while wood and wood products, including furniture attracting rates up to 5 per cent and pulp, paper and paperboard range up to 15 per cent. Products at all stages are important export items. The forestry sector is supported by subsidies, grants, tax credits and concessions, some with a regional assistance dimension.
Under the EEA Agreement, Norway gained improved access to the EU market for certain fish and marine products. Tariff quotas were applied on the accession of Austria, Finland and Sweden to the EU. Fishermen's sales organizations receive prices above world market levels for some products, with the difference financed by the State. Imports may be subject to minimum prices. Fishing inside the Norwegian Exclusive Economic Zone is limited to Norwegian fishing vessels in which foreign ownership is restricted to a maximum of 40 per cent. Foreign controlled enterprises may not trawl from Norwegian vessels and the processing of fish on foreign vessels inside the fishing limits or the Exclusive Economic Zone is not permitted without authorization.
Imports of ores and mining products are duty free or subject to very low duties. There have been no important discoveries of metal ores in recent years. Consideration is being given to a revision of the mining law, which restricts exploration to EEA residents. Exploitation requires a concession.
Most industrial imports are duty-free under preferential trading arrangements. At the same time, average m.f.n. tariffs on industrial products are low, exceeding 10 per cent only for certain detergents, plastic products, leather goods, textiles and clothing and some iron and steel products. There is some tariff escalation in textiles and clothing, footwear and plastic products. The 5.3 per cent m.f.n. tariff on imports of automobiles was reduced to zero in November 1995, eliminating the previous preferential benefits for European producers. Norway does not produce automobiles but exports a number of automotive parts.
As a result of the banking crisis of the early 1990s, the authorities were obliged to take over a number of banks; this increase in State-ownership has now begun to be reversed through privatization. Supervisory regulations have also been tightened. Entry into the Norwegian market for foreign banks was liberalized in the 1980s and early 1990s; foreign banks operate on the same footing as domestic commercial banks.
While there are a number of limitations in Norway's GATS Schedules on financial services, these have in practice been substantially liberalized by the EEA Agreement, whose provisions are being applied on an erga omnes basis to all WTO members. A single licence issued in any EEA member State enables the licensee to operate in others under the same conditions as in the licence-issuing State. The situation in insurance is similar, with WTO reservations being partly countered by m.f.n. application of the EEA provisions. Intermediation through a broker to an insurer not established in the EEA is mainly limited to insurance in the marine, transport and offshore exploration sectors. Certain limitations on national treatment do not affect EEA members.
While the traditional monopolistic structure of the telecommunications sector is being replaced by a more competitive environment, Telenor AS, the public telecommunications operator, is still the dominant entity in public services and terminal equipment and has certain exclusive rights. However, the Government seeks to deregulate telecommunications networks and services according to the timetable set out by the EU, with infrastructure and voice telephony scheduled for deregulation by January 1998. Competition is already allowed in other basic telecommunications services, and the market for telecommunications equipment has been open since 1988.
Domestic air transport was liberalized for local firms in 1994, and the market is to be opened to carriers from other EEA States in 1997. In maritime services, Norwegian coastal trade is open and there are no bilateral freight-sharing arrangements. There is no reciprocity of market access in maritime transport in the EEA Agreement. Subsidies are extended to film production to support Norwegian culture and the Norwegian Broadcasting Corporation receives licence fees to finance its operations. Under the GATS, there are no limitations on market access or on national treatment in travel agencies, tour operators, tourist guides or hotels and restaurants, although there are limitations on the presence of natural persons.
Trade Disputes and Consultations
Since the previous review, Norway has not been involved in any trade disputes reaching panel stages under the GATT or WTO; one outstanding case with the United States was resolved in the Uruguay Round and a second potential dispute with Argentina was resolved in consultations. In 1992, a Panel under the Tokyo Round Government Procurement Agreement found in favour of the United States in a complaint about aspects of procurement for the Trondheim toll-ring equipment. Under the Tokyo Round Subsidies and Anti-Dumping Agreements, panel reports relating to salmon exports from Norway to the United States were adopted in 1994. Norway is currently involved in consultations under the EEA agreement regarding minimum prices for imports of fresh salmon to the EU.
Norway and international trade partners
Since the last review, Norway has undergone a process of market-opening prompted both by its membership of the EEA and its participation in the Uruguay Round. As a result, the Norwegian market is now significantly more accessible for trade partners than hitherto. To some degree, the liberalization taking place with other European countries has led to greater complexity in Norway's trade policies, with a larger number of preferential agreements and greater potential differentiation among trading partners. However, this is countered by Norway's commitments under the Uruguay Round, advance implementation of agricultural concessions and the authorities' own wish to eliminate low duties autonomously, which show Norway's strong commitment to an open multilateral trading system.Back to top
TRADE POLICY REVIEW BODY: NORWAY
Report by the Government - Summary Extracts
Main Trade Policy Objectives
The Norwegian Government's policy is designed to promote and sustain economic growth within the limits set by the environment. Norway's open economy underpinned by a liberal trade policy provides the means for economic growth and adaptability to an increasingly globalized economy. It is the objective of the Government that the beneficial effects of economic growth and trade be translated into increased welfare, full employment, an equitable distribution of income and improved social standards.
The Norwegian Government attaches great importance to pursuing a policy of sustainable development at home as well as globally. Trade policy and environmental policy must be mutually supportive.
Trade is not only essential to achieving economic growth domestically, but also a means for promoting economic growth and political stability in other countries. Trade is therefore also an important part of Norway's foreign policy.
In order to benefit from comparative advantages and economies of scale, Norwegian companies need to participate in markets extending beyond the domestic one. Thus, an important policy aim is to strengthen the international competitiveness of Norwegian trade and industry. Continuous efforts are being made to secure and improve access to foreign markets for Norwegian enterprises. Consequently, Norway has strong interests in trade policy negotiations. Extensive involvement in foreign trade also makes Norwegian companies vulnerable to trade actions, both those directly aimed at Norwegian economic operators and more indirectly through international trade disputes. The best way to address these challenges is through a rules-based multilateral trading system.
The World Trade Organization provides a global means of ensuring that no member country pursues national policies to the detriment of other members' trade interests, and that global trade is conducted according to an open, multilateral trading system based on rules. Since 1947, Norway has played a supportive and active role in the development of the GATT. Active Norwegian participation to strengthen and further develop the multilateral trade rules will continue in the WTO in order to ensure the stability, security and predictability needed by Norway, as an open, outward-oriented country.
Norwegian trade policy towards developing countries plays an increasing role in the formulation of Norwegian development cooperation policy. Norway will continue to promote improvements to the multilateral trading system (MTS) and encourage greater integration of the developing countries, especially the poorest developing countries, into it by means of transitional arrangements, technical support and other measures. To this end, Norway proposed the establishment of a Fund in WTO for financing technical assistance to Least Developed Countries in particular and has contributed US$ 2.5 million to the Fund.
Norway will also target and strengthen efforts to promote trade with developing countries, for instance by channelling aid to measures in the productive sector and the development of trade expertise, and by implementing improvements to the Generalized System of Preferences (GSP), in particular for agricultural products and textiles.
The process of making trade policies and environmental policies mutually supportive is one to which Norway attaches particular importance. Norway therefore participates actively in the ongoing trade and environment discussions in the WTO, i.e. the work to ensure compatibility between multilateral trade rules and international environmental agreements.
Norway actively supports international compliance with fundamental rights as established in core ILO conventions. Norway therefore advocates a thorough analysis and discussion in relevant multilateral fora of possible links between trade and social standards and of means to enforce core ILO conventions. Given the increasing globalization of the world economy, it is also necessary to devise rules that encompass areas of trade that have not been part of traditional trade policy. This is clearly demonstrated by the growing significance of trade in services and by the negotiations of the General Agreement on Trade in Services (GATS). Investment policy related to services is already covered by the GATS, but there are no global rules for international investment that affect trade. The proliferation of bilateral investment agreements underlines the need for global rules. Norway therefore supports the efforts to initiate discussions on this issue in the WTO.
Trade and competition is also an area that merits greater attention in the WTO. Norway has followed a cautious line concerning the use of restrictive trade policy measures. No Norwegian anti-dumping or countervailing duties have been imposed during the past ten years. Norway would be in favour of WTO efforts to design multilateral rules for competition.
It is the Norwegian experience that the dynamics of regionalism are complementary to the multilateral system and contribute to increased global trade, provided that regional agreements are consistent with multilateral trade rules. Norway's regional agreements accommodate the need for deeper economic integration with near markets and have been instrumental in paving the way for liberalization of Norwegian trade policies at the global level. Consequently, Norway will continue to pursue regional and bilateral agreements in order to expand trade and economic cooperation with other European countries and to safeguard Norwegian business opportunities within the global framework of the WTO.
Norwegian trade policy has broad support in the public at large. It is drawn up based on extensive consultations on the national level with various sources, including representatives of trade and industry, labour, consumer and other interested organizations, as well as with the Storting (the Norwegian parliament).
The Economic and Trade Environment
Economic growth in Norway has been strong since the first trade policy review of Norway in the GATT in 1991. The total GDP, fuelled by increased petroleum production, grew on average by 3 ¾ per cent per year from 1991 to 1995. The recovery of mainland activities (excluding the offshore sector) started in 1992 and gathered momentum during the second half of 1993. The main stimulus came from buoyancy in household spending, which was triggered by a significant easing of monetary conditions and a pickup in traditional exports.
The Norwegian krone has remained relatively stable since December 1992. The implementation of monetary policy will continue to be directed towards maintaining a stable exchange rate for the krone against other European currencies. Norwegian interest rates have fallen substantially since the last TPRM. The effective 3-month nominal interest rate, averaging 10 ½ per cent in 1991, was 5 per cent at the beginning of 1996. The Norwegian effective 10-year interest rate is 6 ¾ per cent compared to 10 per cent in 1991.
The policy of the Government is to cooperate with the trade unions and employer organizations in order to strengthen cost competitiveness and thereby secure the basis for full employment. Low nominal wage growth has been an important factor behind the stronger Norwegian economy the last few years. Employment has improved during the past two years. Unemployment peaked at 6 per cent in 1993, but has fallen gradually to a level of 4.9 per cent for 1995 and 4.3 per cent (seasonally adjusted) for the last quarter of 1995. Inflation remains subdued. The rate of consumer price inflation was 1.4 per cent in 1994 and 2.4 per cent in 1995 and is estimated at about 1 per cent for 1996.
General government finances are sound. The general government balance showed a surplus (net lending) of 0.3 per cent of GDP in 1994 and is expected to show a surplus of 1.8 and 2.4 per cent of GDP in 1995 and 1996, respectively. A petroleum fund has been established to contribute to a budgetary process that safeguards long-term considerations in decisions regarding the extent to which the government's petroleum revenues are to be used in the Fiscal Budget. The general government gross debt represented 39 per cent of GDP at the end of 1995.
In recent years a number of important structural reforms have been implemented to improve the way the Norwegian economy functions and to achieve higher growth. Such measures include the tax reform, the reform of the electricity market, the elimination of financial support to Norwegian fisheries and the entry into force of the new Competition Act. Norwegian agricultural policy has changed over the past years. Important goals are the reduction of assistance to the agricultural sector, the lowering of consumer prices on agricultural commodities in order to achieve domestic consumer prices more in line with prices in neighbouring markets, and the reduction of costs and overproduction. The aim is to encourage the development of a more competitive agricultural sector both in terms of primary production level and in terms of processing. Labour-intensive production in rural regions is being given priority, as are environmental measures and measures to preserve the agricultural landscape and promote diversified employment opportunities.
Important Norwegian export sectors are the petroleum sector (crude oil and gas), which contributes with over 30 per cent of Norway's total export revenue, and fish and fish products, contributing with 8 per cent. This clearly illustrates Norway's dependency on natural resources. Traditional goods as such represent approximately 40 per cent of Norway's total export revenue, while the services sector represented about 25 per cent in 1995, half of which came from international shipping.
Trade relations with the European Union have become more important due to the accession to the EU of the former EFTA member countries Austria, Finland and Sweden as of 1 January 1995. With the accession of these countries, the EU received about 75 per cent of all Norwegian merchandise exports and provided about 70 per cent of all merchandise imports in 1995. Comparative figures for the Central and Eastern European countries are 2 and 3 per cent, for North America 8 and 10 per cent, while the figures for developing countries as a whole are approximately 9 per cent for both exports and imports, largely comprising trade with Asian countries.
Trade Policy Developments (1991-1995)
Since the 1991 TPRM, the major trade policy developments for Norway have been the negotiations of the Uruguay Round and implementation of the WTO Agreements and the Agreement on the European Economic Area (EEA). Economic cooperation with Central and Eastern European countries (CEEC) and countries that are members of the Commonwealth of Independent States (CIS) has also improved significantly, in part due to the signing of a series of regional and bilateral trade agreements.
The World Trade Organization
The Uruguay Round of negotiations was of major importance for Norway. The stronger, broader and clearer legal framework resulting from the negotiations has laid the foundation for more equal terms of competition between small and large trading nations, thus reducing the risk of the utilization of unilateral trade measures. Furthermore, interaction between lowered trade barriers and domestic structural reform enhances efficiency as stronger competitive pressures from international markets make it easier to implement national structural policies. More efficient and competitive domestic markets will provide an incentive to conclude agreements on the further lowering of trade barriers.
It was important to strengthen and clarify the rules on subsidies in order to reduce the likelihood of differing, national interpretations. The changes to the dispute settlement system, which ensure that panel decisions can no longer be vetoed, were vital to the credibility and effective functioning of the WTO. Though the Uruguay Round succeeded in meeting many of Norway's concerns regarding rules, there is still room for improvement in future rule-making, for example on anti-dumping. Norway became involved in a dispute in this area during the TPRM-period, following the imposition by the United States of countervailing and antidumping duties on Norwegian fresh salmon. These duties virtually excluded exports of Norwegian fresh salmon from the United States market.
The conclusion of a TRIPs agreement represents a significant step towards safeguarding patents and other intellectual property rights. A fundamental advance towards trade liberalisation was made with the GATS Agreement, which outlines the framework for trade in services. However, it was a setback that binding market access and national treatment commitments were not included with respect to maritime transport. Maritime transport represents about 90 per cent of international transport of goods. Thus, liberalization should benefit all countries. As international shipping is a service of particular importance to Norway, we have taken active part in the continued negotiations in this field.
The market access negotiations of the Uruguay Round resulted in greater export opportunities for a number of industrial products. However, the results were limited for trade in fish and fishery products, and future negotiations should provide increased market access.
The Act to implement the WTO and its agreements was adopted by the Storting in November 1994. Supplementary acts were passed in December 1995.
The Norwegian import régime for agricultural products changed fundamentally following the implementation of the WTO Agreement on Agriculture. All non-tariff import measures have been replaced by customs tariffs. Internal support measures have been adapted and reduced in accordance with the WTO Agreement. Export subsidies have also been reduced in compliance with WTO commitments. The average reduction in import duties was 36 per cent for agricultural products (unweighted average). The reduction of duty rates related to agricultural products has been accelerated in relation to the WTO commitments so that the GATT-bound tariff levels for agricultural products set for the year 2000 were implemented as of 1 July 1995.
For all other products, the average reduction in import duties was 44 per cent (weighted average). The reductions resulted in a weighted average tariff rate of 2 per cent for manufactured goods. The reduction on manufactured goods will be implemented within a period of five years.
As concerns bilateral textile quotas, Norway is considering the elimination of the existing quantitative restrictions over a five year period.
Norway has seized the opportunity created by the transition to tariff-based protection to improve market access for agricultural products from developing countries, especially from the least developed countries. A temporary arrangement was implemented from 1 January 1995. This arrangement was revised, and the range of goods was extended as of 1 July 1995. In the revised scheme, all agricultural goods from the least developed countries are eligible for preferential treatment, with zero duty on all products except for grain, meal and feeding stuffs, which qualify for a 30 per cent cut in duties within certain quantitative ceilings. For other developing countries, all products except milk and dairy products, live animals and certain processed agricultural products, are included in the scheme. The preferences for these countries range from 100 per cent to 10 per cent cuts.
The European Economic Area (EEA)
The Agreement on the European Economic Area was signed by the member countries of the European Community and the European Free Trade Association on 2 May 1992. The Agreement came into effect for the EU and five of the EFTA countries on 1 January 1994, with Liechtenstein joining on 1 May 1995. The Agreement was jointly notified to the GATT by the EC and the EFTA member states on 17 July 1992 (see GATT document L/7048).
The Agreement on the European Economic Area substantially widens and deepens the free trade relations established through the Free Trade Agreement concluded in 1973 between the EC and Norway. The EEA Agreement - comprising 49 Protocols and 22 Annexes - aims at establishing a dynamic and homogeneous European Economic Area in which there will be free movement of goods, persons, capital and services (the "four freedoms") under equal conditions of competition. The EEA objectives will be achieved through EEA rules, which correspond to EU rules and their interpretation by the rulings of the EU Court of Justice (the "EU acquis"), if done before 2 May 1992, in all areas concerned. This includes competition policy and state aid, and the horizontal policies which are related to the four freedoms, e.g. company law, statistics, and relevant parts of social and environmental policy. The EEA Agreement also provides for strengthened cooperation in areas outside the four freedoms, such as R&D, training, small and medium-sized enterprises, consumer protection, audiovisual matters, culture and elements of environmental and social policy. Moreover, the Agreement contains provisions on an EFTA financial mechanism aimed at the reduction of economic and social regional disparities.
The EEA is not a customs union: it does not provide for a common external tariff or a common trade policy. Norway remains autonomous in its third country relations and retains its treaty-making power.
Secondary Community legislation is brought into the EEA by means of direct references in the Agreement to the relevant Community acts. Accordingly, the 22 Annexes and some of the Protocols to the Agreement currently make references to some 2,000 directives, regulations, decisions and other acts, which in accordance with the Agreement apply throughout the EEA. Around 750 of these acts apply to technical regulations and the removal of technical barriers to trade.
The Agreement provides for decision-making procedures for the integration of new, secondary Community legislation into the EEA. The EEA Joint Committee has added more than 600 new Community acts into the Agreement since its entry into force.
Free Trade Agreements
Starting in 1992, EFTA countries have concluded free trade agreements with Poland, Hungary, the Slovak Republic, the Czech Republic, Bulgaria, Romania, Slovenia, Israel and Turkey. The agreement with Slovenia was signed 13 June 1995 and has been applied on a provisional basis. The EFTA countries also signed free trade agreements with Latvia, Lithuania and Estonia on 7 December 1995. Until these agreements enter into force, Norway's bilateral free trade agreements with the three Baltic States continue to apply.
EFTA's free trade agreements cover free trade in industrial products, fish and marine products and processed agricultural products. In addition, each EFTA country has concluded bilateral agricultural protocols with each of the third country partners. The bilateral agricultural protocols are an integral part of EFTA's multilateral agreements. The free trade agreements incorporate provisions on a number of new trade issues, including rules of competition, state aid, public procurement and protection of intellectual property. The agreements also contain evolutionary provisions for services and investments, as the parties recognise the growing importance of these areas and will co-operate with the aim of achieving the gradual liberalisation and mutual opening of markets for investments and trade in services, taking into account developments in European integration and the WTO.
Since the dissolution of the former Soviet Union, Norway has developed a new set of trade and economic agreements with Russia and the other member countries of the Commonwealth of Independent States (CIS). Norway signed a bilateral agreement on trade and economic cooperation with Russia in March 1996. An agreement has also been concluded with Croatia. The agreement with Russia is based on the principles of the WTO for goods, services and TRIPs. It states that Norway and Russia shall give each other MFN-treatment, with exceptions specified, and stipulates that payments shall be made in convertible currency unless otherwise agreed. Countertrade transactions are to be regarded as exceptional, and access to public procurement markets shall be given on a mutual basis. Consultations shall be carried out in case of trade distortions. Back to top